Global Resistor Shortage, Economics, and Consumer Behavior

The passive component industry — the manufacturers who make the boring but vital resistors, capacitors, and diodes found in every single electronic device — is on the cusp of a shortage. You’ll always be able to buy a 220 Ω, 0805 resistor, but instead of buying two for a penny like you can today, you may only get one in the very near future.

Yageo, one of the largest manufacturers of surface mount (SMD) resistors and multilayer ceramic capacitors, announced in December they were not taking new chip resistor orders. Yageo was cutting production of cheap chip resistors to focus on higher-margin niche-market components for automotive, IoT, and other industrial uses, as reported by Digitimes. Earlier this month, Yaego resumed taking orders for chip resistors, but with 15-20% higher quotes (article behind paywall, try clicking through via this Tweet).

As a result, there are rumors of runs on passive components at the Shenzhen electronics market, and several tweets from members of the electronics community have said the price of some components have doubled. Because every electronic device uses these ‘jellybean’ parts, a decrease in supply or increase in price means some products won’t ship on time, margins will be lower, or prices on the newest electronic gadget will increase.

The question remains: are we on the brink of a resistor shortage, and what are the implications of manufacturers that don’t have the parts they need?

An Informal Investigation Into Chip Resistor Shortages

With news of a coming shortage, you would expect resellers to bump up prices, buy more stock, or do something to ensure a steady supply of SMD resistors for the coming years. There are two ways to figure out if this is happening. The first is advanced analytics from a company that takes a look at tens of thousands of BOMs and gives engineers the tools to determine the right component for their supply chain. The second method is to look at some old Mouser invoices.

I’ve purchased a few reels of Yageo resistors in the past, and looking through my Mouser order history, I haven’t seen any change in the price between six months ago and today. A reel of five thousand 220 Ω, 0603 resistors from Yageo cost $10 last June, and it costs $10 today. Of course, this is a dataset of one, and to truly understand the stock situation we need better data.

FindChips Pro, a search tool for electronic components (owned by SupplyFrame, who are owners of Hackaday and the people who pay me), has a “Part Intelligence” tool for looking at historical price and stock situations for various components. For example, the stock of Yageo’s RC0603JR-071ML, a 1 MΩ, 0603 thick film resistor, has gone down across all distributors for the past six months. In August of 2017, about ten million of these resistors were for sale across all distributors. Today, a shade over six million are available. The price, however, has not increased. When the price demand curve will catch up with inventory is an open question. [data source — requires login to view historical data]

Learning a Lesson of Beef Consumption

News of a potential shortage of such a vital commodity like chip resistors and capacitors may come as a shock to some, and of course precedes the obvious question: should companies stock up on these jellybean parts? Should you lock in your prices now, and buy an entire year’s worth of inventory? What would happen if everyone did that? History shows us you shouldn’t.

There were plenty of shortages of consumer goods in the United States during the early 1970s, most notably a gas shortage. But there was another that provided a great insight into why you shouldn’t stockpile goods beyond what you need during a shortage. In 1971, a corn blight struck crops in the American southeast, raising the price of livestock feed. In response, livestock producers reduced their herds, and the price of meat — especially beef — increased dramatically. By 1973, a beef shortage was reported in the media, and consumers complained about the high cost of a good steak.

Also in 1973, William Rathje, a young archaeologist at the University of Arizona, started studying garbage. Tucked away inside bags of household refuse collected in ’73 was garbage that would surprise anyone paying attention to the beef shortage. Beneath grapefruit rinds and coffee grounds, he found surprisingly well-preserved t-bone steaks, wrapped in paper towels. Other bags of trash excavated during the first season of Rathje’s Garbage Project revealed even more cuts of beef, ostensibly perfectly edible when they were discarded. In these bags, you could also find newspapers reporting on a beef shortage, and the results of media surveys clearly demonstrating that consumers were reducing their beef consumption. In fact, analysis of garbage showed consumers were buying three times as much beef during the beef shortage than before or after. Consumers were stockpiling and panic buying, without realizing beef is perishable. Others were buying cheaper, unfamiliar cuts of beef they didn’t know how to prepare. During a beef shortage, beef consumption increased. Human psychology is odd.

The moral of the beef shortage story is to buy what you forseeably need, and not what you fear you’ll be unable to get. To do the latter in our current scenario will result in reels of components going unused on racks and in closets around the world instead of being available when needed. Resistors don’t spoil as fast as t-bone steak, but nobody likes carrying excess inventory, and hoarding behavior definitely misallocates a scarce resource.

Unnecessary stockpiling can be bad, but the electronics industry is also very weird. There is no other industry on Earth where one random dude can buy the world’s supply of something. I, myself, have done this accidentally. Then again, the market for commodity resistors is different from that for rare components where being able to source a part makes or breaks a product release. This is likely to be a temporary blip. There is enough inventory out there, and market forces will prevail eventually demanding resistor manufacturers spin up their lines and produce a few thousand more reels of resistors. But until then, we may very well see higher prices for chip resistors, potentially bumping up BOM costs a few cents.

For the “better good”, it would be best for everybody if nobody would stockpile resistors they end up not-needing.
But the problem is that your: “it would be best if”… does not influence the behaviour of ALL people, so a rumor that resistors may be scarce in the near future will cause an actual shortage on short notice. They won’t go to waste like the beef, but they will be stockpiled for quite a while….

Well.. when a large passive is smaller than a grain of sand and we are all too old to adapt to whatever construction style allows for that.. it’s those hoarders that will be selling their old stocks on Ebay and their children selling their junk piles in big cardboard boxes under hamfest tables after they die or worse, go to the old folks home that will allow us to keep building things.

that was the basis of UK rationing during WW2. There was a limit on how much X/Y/Z you could by but in return the government guaranteed you could always buy X/Y/Z so you didn’t need to buy it until you needed it

It’s much easier than you think. I did it (intentionally) the other day. Mouser and the smaller houses were out and digi-key had only a couple of hundred left, so we bought all of them. Boom. Global shortage [exaggeration]. But only until the mfg delivers the next batch, like 2 months. In this case it was a particular 5-pin RA circular connector.

One time I was the country’s largest purchaser of Rogue Imperial Stout. Turns out nobody (at the time) was buying it by the case. I happened to work at a distributor, and bought a case on behalf of a friend. At $13/bottle (distributor pricing), bars and restaurants were only buying a couple bottles at a time, mainly for decoration.

My coworker in purchasing got a call from the sales guy at Rogue to verify it wasn’t a mistake.

I actually almost did this once. Or rather, my sub-contractor did. They were manufacturing two boards for me with a specific contact, and when I was making a revision and was about to buy some extra components for my own testing, I found that the part I wanted was nowhere to be found, so I phoned my sub-contractor and asked if they had those components, because I couldn’t find them. Apparently, they had bought all of them.
This story has repeated itself a little now and then, so I it’s probably more common than people think, especially if you use components that are not the most common ones.

A large part of the issue is a slight increase in demand (relatively good global economy right now) coupled with a constant drive to lower electronics costs. The component manufacturers can only lower costs so far, and many operate at a loss already. Now, there’s no incentive to invest the money for a new passive component fab. They will make as many resistors as they can and no more. In a way, I think we may have found the intersection of the price/demand curves on this stuff.

I’m not a real economist, I just work for a relatively large components manufacturer and that’s basically what they’ve told us. I’m not directly involved, but there are daily conference calls where some widget maker is asking for more resistors and we have to tell them “no, not for a while.” Same question and response every day and everyone is going nuts. Seems like a prime situation for a flood of fakes to hit the market, so be careful out there.

People do this a lot. We see something apocalyptic when something extremely inexpensive becomes a cent more expensive, as if it’s going to disappear and we have to start hoarding it now. I think people secretly want the world to end or something.

They’re mining Ethereum and other alt-coins that use neither SHA-256 nor scrypt for their proof of work. Profitably, it seems, since the GPU (and high end power supply, and low end CPU, and ≥ 4 slot Mobo) shortage continues.

The prices of alt-coins tends to vary in sync with Bitcoin, because confidence or lack thereof spills over to the me-too crypto currencies. If Bitcoin implodes, all the others probably will, too.

Digi-Key is a pretty poor representation of large-scale supplies and costs, though. Basic resistors are so cheap that about 90% of Digi-Key’s price is markup, which makes the price differences much less apparent (and often not very well correlated to the wholesale price). The majority of parts are sold straight from the factory to the PCB assembly plant, where switching from the $9/reel Yageo part to the $40/reel Panasonic part isn’t a “sure, whatever, nobody cares” decision. It won’t suddenly make it unprofitable to manufacture smartphones, but low end products that already have thin margins could see some problems. Those price changes will have to propagate up the chain, screwing up previously negotiated contracts and schedules.

Maybe not eliminate, but definitely shakeup some business models. Remember the C.H.I.P.? Those guys went out of their way to make that thing as cheap as they possibly could, to the point of using a composite video output instead of a mini-HDMI. A few cents here and there may not be a big deal to most, but when your fixed price is your entire selling point, you may have to bump up the number of preorders to keep the same pricing structure, and where does that leave your early adopters who now have to either promise to buy more, or play PR and get their chums to spread the word.

I’m so happy I’m designing products that sell only in the hundreds or less per year and that are quite expensive. For my (relatively) small volumes, it doesn’t matter if my resistors cost 1 or 2 cents a piece. It barely makes a dent in the BOM cost, compared to what many other things cost.

Yeah, me too. I wouldn’t care a whole lot if the passive reel prices tripled, generally. I just need to be able to get them. I’ve had a serious problem with ceramic capacitors lately, though. It’s not just resistors. I’ve got a new revision CPU board that changed footprints to allow 1210s as well as 1206s on the bigger caps entirely because of supply issues.

Actually, I find it ridiculous that I just as I’ve managed to make it 7 years without ever hitting a critical distributor shortage that I couldn’t solve somehow (had a few close calls) to finally reach a point where I can afford to stock everything to the manufacturer’s lead time requirements… and now those lead time numbers go fuzzy and are no longer reliable.

In global economics, if there is a shortage of a desired product, alternatives will be found.
So, if a plant in China cuts back or stops producing resistors, I believe another plant will start producing them, whether it is in Vietnam, India, Malaysia, Angola, or Timbuktu…

Or maybe there was an excess previously and this is a market correction. I love the availability of inexpensive parts as much as anyone and hope that isn’t so but you have to admit, being able to buy a years supply of anything for just a few dollars is a little suspect.

Also, even if there wasn’t an over-supply and now there really is a shortage. It will take time for some other company to realize the void, decide to fill it, tool up their factories start producing and distribute. Meanwhile if this news triggers a bunch of panic buying we can expect at least a temporary price hike.

It isn’t just Yageo. I work as a component/continuation engineer. We have been getting notices from basically all passive component manufacturers telling us that the market is going into “allocation.” When you buy 3.1 million a year of a given part, and get told you will only be sold .75 million, it hurts.

It also hurts when you have a part from every big name manufacturer on your qualified list, only to find that not a single one has produced the part you need in the last month (Want a 649ohm 2010 package resistor? Good luck! We had never heard of Viking America before, apparently they had some.)

Most manufacturers are expecting a market bubble to be popping at some point this year. They don’t want to be stuck with inventory, and they don’t want to invest capital on equipment that might sit idle in a few months. The little guys trying to fill the gaps are complete unknowns in many cases (and as I work in life safety, a dark grey area we avoid), and not able to keep up with demand in others.

There is a continuing capacitor shortage in Shenzhen.
For example the price of capacitors in the EOMA68-A20 compute card went from 0.5usd to 2.5usd.
This is much better than the worst 4-8usd figure quoted a a month or two back.
But still a hefty increase.

“There is no other industry on Earth where one random dude can buy the world’s supply of something.”

For all the kids who don’t realize how good they have it these days…

I think this was a common strategy back in the pre-internet days. Buy up all of some part and design a project around it. Then get that project published in a hobbyist magazine like “Popular Electronics”, “Radio Electronics”, etc… In the fine print of the BOM mention your address and that you would be happy to help the user get ahold of the hard to find part for some inflated price.

LOL

Today if you tried that there would probably be 10 common substitutions listed in the forum comments within an hour.

Now I really want to know the story of Brian buying the worlds supply of something accidentally.
Was it those vertical sodimm sockets you mentioned a while back discussing the Pi Compute Module?
I have been looking for those and they seem as rare as hens’ teeth.

This seems silly to me. This isn’t like the capacitor plague. There’s no “secret sauce” to making chip resistors. They’re commodities. Yaego doesn’t want to make them anymore? Panasonic will just ramp up. Or Vishay. Or Stackpole. Or…

Or maybe Yaego will start producing resistors again. I see it a lot with commodity manufacturers. They cut a product line because it is unprofitable, the market panics and drives up the price, the company then restarts that product line now that they can sell it for a profit again. In some cases, the manufacturers manipulate the market so they can finally afford to upgrade the machinery and still make a profit even when the prices fall back below pre-shortage levels.

And then there’s the time that Hackaday bought up all of the 38mm Kingbright common-anode 8×8 LED displays (red _and_ green) and Voja had to spin up some badges that worked with common-cathode and re-write the software to autodetect which display it had.

I’ll admit to buying a couple of reels recently… but not because of this.

It just happens that 1k and 10k resistors, sometimes 100k dominate my designs, and I either use 1206 or 0805. I might get some reels in other values, but basically, beyond, maybe 10 values, I can’t see me buying many reels of resistors as there’s no call for them. Those common values though, I use a lot, and the reels do not take up much space, so for AU$10 a pop, why not?

I actually had quite significant problems getting an off-value resistor in 0805 I used to not have any issues at all getting, this caused a panic buy direct from manufacturer off quite a few to prevent an embarrassing and time consuming mass bodge

“Yageo was cutting production of cheap chip resistors to focus on higher-margin niche-market components for automotive, IoT, and other industrial uses, as reported by Digitimes.”
I get that the AEC Q200 qualification could drive up the requirements and costs a little for automotive parts, but why would you need any special passive components for an IoT-device or standard industrial applications?
This looks more like they want to (ab-) use theyr global market power (they own roughly 30% of the market in passive components) to drive prices up and make shareholders happy…

MLCC shortage is real. We’ve heard it from all suppliers, not just Yageo. Some distribs still have a good supply in stock but don’t trust the pricing on their websites. It is changing on a daily basis. Resistors not as bad but definitely rising. We buy most of our resistors & caps from a USA manufacturer. If they don’t have stock, they can usually produce commercial-grade in 1-2wks and military grade in 3-4 wks (including burn-in).

Hey MB, who is the USA company that manufactures commercial-grade resistors in 1-2wks and military grade in 3-4 wks (including burn-in)? Is it Vishay? I got a quote much much longer than this from them.

This reminds me of 4000-series logic chips a decade or so ago. A couple of the big manufacturers decided to use their fab capacity for something that cost more than than the packaging and the price went up enough to tempt at least one of them back into production.

Dennis, in response to your question about the the company that manufactures resistors in 2wks (commercial) and 4wks (military) isn’t Vishay. It’s RCD Components in New Hampshire, USA. They’re one of the old timers started 50 yrs ago.

“Shortages in memory and multilayer ceramic capacitors (MLCCs) slowed delivery of customer-premises equipment (CPE) products. As a result, CEO Bruce McLelland told today’s earnings call, some production will be shifted from Q2 to Q3.”